The increase in imports during the first quarter of this year could indicate Brazil has begun a de-industrialization process, cautioned Jose Augusto de Castro, president of the country’s Foreign Trade Association, AEB.
Comparing the first quarter of this year with the same period in 2010, Brazil’s GDP expanded 4.2% but imports of goods and services soared 13.1%, said de Castro.
“Imports soared in volume because of an over valued foreign exchange and because some sectors of the economy are substituting Brazilian manufactured goods with imports which means a de-industrialization process”, insisted the Brazilian businessman.
He also pointed out to the fact that imports of consumer goods are growing faster and stronger than raw materials and intermediate goods, which is again a clear signal of a slowing down of the Brazilian industrial sector.
“Industry stops manufacturing and prefers to buy finished goods because they are cheaper”, said de Castro.
“This will be even more evident in the second quarter with a further contraction of industrial production growth”, warned AEB president.
In related news Brazilian Industry minister Fernando Pimentel said the government was preparing a package of measures to counterbalance the loss of competitiveness caused by the adverse exchange rate, and to promote consumption of domestic manufactured goods.
Measures will include tax exemptions, incentives for innovation investments and a strong financial boost to help fund exports said Pimentel.
“I would like to see them effective sometime before the end of the month but we can’t talk of a time table since who decides is the President”, insisted Pimentel.
The package will also include a government procurement policy with a greater domestic content.
“We already have a policy which is applied to Petrobrás purchases and in the electric power sector, but we are thinking of going even further. Municipal, state and federal governments are big buyers and if we can manage to increase the domestic content of these purchases we would be giving our industry a great boost”, said the minister.
“There’s nothing wrong, retrograde or protectionist in this, all countries of the world does it to defend their economies, to defend local jobs, businesses and their workers”, argued Pimentel.
According to the minister the sectors which have most suffered are heavy industry and manufacturing, which generate many jobs.
Pimentel again insisted that the foreign exchange won’t be solved with internal measures and “is out of control of Brazilian government actions”.
“It doesn’t depend on us. That is directly related mainly to the monetary policy of the United States which is involved in a clearly expansionist monetary policy almost to the fringes of irresponsibility. Who can compete with the US Treasury and the Federal Reserve?, concluded Pimentel.